A hotter-than-expected jobs report is sending U.S. stocks and bond prices lower Friday morning, as traders boost bets on a rate increase from the Federal Reserve this month.

U.S. Treasury yields jumped after the latest report from the Labor Department, which showed that the U.S. economy added 162,000 jobs in August. That marked a sharp increase from the revised 21,000 gain for July. It's also about three times the amount expected by economists.

The unemployment rate held steady at 4.1%, matching expectations.

The two-year yield, which closely tracks interest-rate expectations, jumped briefly past 4.4%. U.S. stock indexes opened in the red.

This month's report comes at a crucial time for markets, with investors anxiously trying to discern whether the Federal Reserve will lift rates on Sept. 16. Fed officials have made clear that inflation data will play the biggest role in their decision. Investors now see a 60% chance that the Fed will increase this month, up from 52% before the report's release.

In a reminder of the inflation pressure facing the Fed, diesel prices hit a new all-time high of $5.85 a gallon Friday, surpassing their previous record from 2022. Oil prices are retreating slightly, with Brent hovering around $95 a barrel.